It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
The New Zealand Herald has published a mini bio of the ruling class in Russia. Ruling Class. Not party apparatchiks, not the central committee, though many of them came out of the ruling one party state. The AZ of Russian oligarchs Contrary to the ideological mythology of the liberaltarians, when state capitalist regimes embrace capitalism they do not become free markets, or markets period. They merely become monopoly capitalism. And the difference between state capitalism and monopoly capitalism (the military industrial complex) is an illusion.
The roots of the crisis of liberalism, as an alternative non-socialist path to human freedom, lie in the phenomenon of globalisation.
Each strand of political praxis is informed by a political philosophy which analyses the world around us, especially, in modern times, its economic characteristics. On the basis of this analysis, the particular political philosophy sets out the objectives which have to be struggled for, and the political praxis informed by it carries out this struggle.
The objective may be difficult to achieve, more difficult in certain contexts than in others, and this difficulty may act as a hurdle for political praxis; but this does not constitute a crisis for that political philosophy. The sheer difficulty of achieving an objective does not constitute a crisis. A crisis of a political philosophy arises when it has an internal contradiction, when the objective it puts forward is logically in conflict with some other feature in which it believes.
Many would argue that the objective of socialism that the political philosophy, Marxism, puts forward, has in the present context become somewhat more difficult to achieve. But this, while explaining the present weakening of the Left, does not constitute any crisis for Marxism.
The political philosophy called liberalism, however, is facing a crisis in the sense that the objective it puts forward for the achievement of what it perceives as human freedom, is logically impossible to achieve in a world which liberalism itself holds dear. In other words, there is a logical contradiction within itself which has arisen in the course of the development of the economy and to which it has no answer. The crisis that liberalism faces is of this nature.
Modern liberalism was developed in response to the Bolshevik Revolution during the capitalist crisis of the inter-war period, as a way of resolving that crisis, and other similar crises that could arise in future, without transcending capitalism. It believed that the combination of Western-style liberal democracy and capitalism tempered by State intervention, provided the best framework for achieving human freedom.
It believed that under the institutions of Western-style liberal democracy, the State, far from being a class State, would express social “rationality”, and would do so better than under any other institutional framework. Hence, such a liberal democratic State can intervene in the economy both to rectify any malfunctioning that may arise because of the spontaneous working of capitalism, and also to make this spontaneous working, even when it is not a case of malfunctioning, conform to the demands of social rationality.
This version of liberalism, in whose formation the English economist John Maynard Keynes had played a major role and which Keynes had called “new liberalism”, differed from earlier versions of liberalism in so far as those earlier versions had wanted State intervention to be kept to a minimum, in the erroneous belief, that had prevailed earlier, that the capitalist economy always operated at “full employment”.
This new version of liberalism, even if we do not go into its validity within the institutional framework it envisages (and it is utterly invalid, among other things, because of the phenomenon of imperialism which it does not even cognise), certainly ceases to be valid when capital, including finance, gets globalised. This is because we do not in this case have a nation-State presiding over capital that is essentially national, but a nation-State confronting globalised capital. And in any such confrontation, the nation-State must yield to the demands of globalised capital for fear of triggering a capital flight, which means, as even the most ardent “new liberal” would admit, that the State cannot possibly act as the embodiment of social rationality.
Put differently, the presumption behind “new liberalism” was that the domain over which the writ of the State ran and the domain over which the capital originating in that country operated, more or less coincided. This was, in fact, the case when Keynes was writing and even later. But with increasing globalisation of capital, this presumption loses its validity. And when this happens, then it is unreal even to pretend that the executive of the State would be goaded by public opinion to act in ways that it thinks are socially rational, irrespective of whether globalised capital concurs with such action.
The roots of the crisis of liberalism, therefore, lie in the phenomenon of globalisation; but this crisis clearly manifests itself in the period of crisis of neo-liberalism when large-scale mass unemployment appears on the scene, which was exactly what Keynes thought was the Achilles heel of capitalism that, unless overcome though State intervention, would make the system vulnerable to Bolshevik-style revolution.
The pursuit of Keynesian “demand management” that was supposed to overcome the crises of overproduction that plagued capitalism, requires that larger State expenditure, the panacea for the crisis, should be financed either by raising more taxes at the expense of the rich or by raising no extra taxes at all, that is, through a larger fiscal deficit: larger State expenditure financed by raising more tax revenue at the expense of the working people who consume much of their incomes anyway, would not add to aggregate demand and hence would not alleviate the crisis.
But these two ways of financing additional State expenditure, taxing the rich and increasing the fiscal deficit, are both opposed by globalised finance capital which, therefore, eliminates the scope for any fiscal intervention by the State against the crisis. It can, of course, intervene through monetary instruments but these, as is well-known, are extremely blunt, often encouraging inflation that compounds the crisis, rather than stimulating larger private spending.
Within neo-liberalism, therefore, there is no way of overcoming the crisis; Keynes’s “new liberalism” comes a cropper. The cul-de-sac or dead end of the neo-liberal economic regime, therefore, becomes a crisis for the political philosophy of liberalism.
This entry into the economic cul-de-sac can be illustrated with the example of Europe. Until the mid-seventies, the unemployment rate in European Union countries (15 members at the time) had been less than 3% for a long period. It started climbing in the late seventies and the eighties as globalisation proceeded, and has remained roughly above 7% on average since then, though with variations between countries; and State intervention has been unable to bring it down.
Since a single nation-State cannot intervene to boost aggregate demand and reduce unemployment when confronted with globalised capital, the country can either impose capital controls to get out of the vortex of globalised finance altogether, or have a co-ordinated fiscal stimulus along with other countries. In which case, capital’s tendency to fly out of any country that expands demand can be checked (since all countries would be following a similar policy of expanding State expenditure).
The first of these entails getting out of the neo-liberal regime: capital controls would also necessitate, sooner or later, trade controls, and this means that the basic character of a neo-liberal regime, namely relatively unrestricted flows of capital and goods and services, would be infringed. International finance capital will oppose this tooth and nail, so that such a course would require an alternative class mobilisation that cannot remain confined to a programme of preserving monopoly capitalism.
The second of these routes, if it is to be a genuinely coordinated fiscal stimulus across all countries, requires a degree of internationalism that capitalism, with its in-built tendency for dominating the periphery, is incapable of demonstrating. It can, therefore, at best introduce a coordinated fiscal stimulus within the metropolis even while imposing fiscal austerity on the periphery, which would mean a tightening of imperialism.
Capitalism may well try this, but such a tightening of imperialism cannot be acknowledged by liberalism as a feather in its cap; on the contrary, it would mean a defeat of liberalism as it presents itself, namely, as an alternative non-socialist path to human freedom.
It is this predicament of liberalism that constitutes its crisis. It cannot claim that freedom is possible within capitalism when there is large-scale unemployment which also keeps wages down, causing a general stagnation or worsening in the condition of labour. It cannot overcome this material reality without transcending neo-liberal capitalism, the requisite class alliance for which would carry the economy beyond capitalism itself. (The talk of retreating to a pre-neoliberal capitalism is analogous to the talk of returning to an always mythical ‘free competition capitalism’ as a means of doing away with the ills of monopoly capitalism, that Lenin had pilloried in his book Imperialism). Any acquiescence in a coordinated fiscal stimulus among metropolitan countries alone for reducing unemployment that leaves out the periphery from its ambit, amounts to a betrayal of what liberalism claims it stands for.
Classical liberalism had come to grief during the Great Depression. Keynesian, or new liberalism, has come to grief with the crisis of neo-liberalism. And there are no other versions of liberalism that are available, or even possible, which can take economies out of their current stagnation while keeping them confined to their capitalist integument.
The Times: Morgan Stanley reported the first quarterly loss in its 73-year history after taking writedowns of $9.4 billion (£4.7 billion) on mortgage-related investments. The bank was forced to agree a $5 billion cash injection from Beijing.
The reason is that they are sitting on trillions in Foreign Direct Investment funds that they have not expended yet. Allowing them to be able to come in and bail out their capitalist competitors. Dr. Kathryn Dominguezof the Gerald Ford School of Public Policy presented her paper on this topic at the U of A School of Business annual Eldon Foote Lecture in October which I attended.
I recommend reading her paper as it will explain why China's investment in Morgan Stanley is not unexpected, and in fact is the beginning of their bail out of big banks and financial corporation which are suffering as the credit crunch expands from the subprime meltdown.
International reserve accumulation by developing countries is just one example of the puzzling behavior of international capital flows. Capital should flow to where its return is highest, which ought to be where capital is scare. Yet recent data suggest the opposite – net capital flows from developing countries to industrialized countries. This paper examines the role of financial market development in the accumulation of international reserves. In countries with underdeveloped capital markets the government’s accumulation of reserves may substitute for what would otherwise be private sector capital outflows. Effectively, these governments are acting as financial intermediaries, channeling domestic savings away from local uses and into international capital markets, thereby offsetting the effects of domestic financial constraints that lead to excessive private sector exposure to potential capital shortfalls.
STATE MONOPOLY CAPITALI$M Toshiba's chairman says wants to stay on, says new directors needed By Makiko Yamazaki
REUTERS
Reuters/KIM KYUNG-HOON FILE PHOTO: The logo of Toshiba Corp. is seen at the company's facility in Kawasaki,
TOKYO (Reuters) -Toshiba Corp's chairman of the board on Monday pushed back against investor calls to resign, saying he wanted to help right the crisis-hit Japanese conglomerate and would bring in new directors. Toshiba has come under fierce scrutiny after an independent investigation last week revealed management colluded with Japan's powerful trade ministry to block foreign investors from gaining board influence, in what one leading shareholder has called the world's worst corporate scandal in a decade.
In response to the investigation, the once-storied conglomerate said over the weekend it would no longer be putting forward the names of two directors for re-election and that two other executives would also resign. Those changes were not enough for proxy advisory firm Institutional Shareholder Services Inc (ISS) which on Monday reiterated that Board Chairman Osamu Nagayama should step down - a call that has been echoed by other investors.
At a news conference, Nagayama apologised and said there were lapses in governance, but the former pharma executive said he wanted to stay on and help reconstruct management at Toshiba.
The company needs directors with a "global perspective" and a background managing similar firms, he said, adding Toshiba would call an extraordinary general meeting and speed up plans for a strategic review.
Toshiba said on Sunday the chair of its audit committee, Junji Ota, and another committee member, Takashi Yamauchi, will retire as directors. The audit committee has come under criticism from investors for failing to take action even after its members became aware of the collusion against shareholders.
The two other company executives who will depart allegedly reached out to the Ministry of Economy, Trade and Industry (METI) seeking support in Toshiba's battle against foreign shareholders over board nominees ahead of an annual general meeting last July, according to the investigators' report. Though oft-battered by scandal, as a manufacturer of nuclear reactors and defence equipment Toshiba remains hugely important to the Japanese government. Japan's trade minister on Friday denied his officials directed an adviser to lean on Toshiba's foreign shareholders. THE BLAME GAME
The shareholder-commissioned investigation has marked an explosive turn in a long battle between the company's management and foreign shareholders and has renewed concern about governance in the world's third-largest economy and its openness to foreign investors. Toshiba's second-largest shareholder, 3D Investment Partners - one of the investors that the investigators' report said was targeted by METI - on Sunday also called for the resignation of Nagayama, Ota, Yamauchi as well as another audit committee member, Nobuyuki Kobayashi.
Nagayama blamed Toshiba's former CEO, Nobuaki Kurumatani, for helping pitch the company into crisis.
"There was a somewhat confrontational stance towards shareholders brewing from some time ago," Nagayama said, when asked about the responsibility of the former chief executive.
"That's an underlying cause in one sense for the current state of affairs."
Nagayama on Monday said some of the information detailed in the investigators' report had been previously been mentioned in an earlier internal Toshiba report - an acknowledgement that provoked ire from some investors.
"It rings hollow for Chairman Nagayama...to try and shift the blame to just Kurumatani alone. If anyone should resign to take responsibility over the governance failures in monitoring management, it should be him," said an investor in Toshiba declining to be identified due to the sensitivity of the matter.
Since the push by activist shareholders this year for greater accountability, Toshiba has faced and dismissed a $20 billion bid from CVC Capital. But leading shareholders have called on it to explicitly seek offers from potential suitors.
Nagayama said the company has not received offers from private equity funds since CVC but a planned strategic review committee would be looking at various options including taking Toshiba private.
He added that he wanted to include two of the company's foreign directors in the four- or five-member committee. Toshiba currently has four foreign directors among its 11-member board.
(Reporting by Makiko Yamazaki; Writing by David Dolan; Editing by Edwina Gibbs)
The theory of state monopoly capitalism (also referred as stamocap) was initially a Marxist thesis popularised after World War II. Lenin had claimed in 1916 that World War I had transformed laissez-faire capitalism into monopoly capitalism, but he did not publish any extensive theory about the topic. The term refers to an environment where the state intervenes in the economy to protect larger mon…
These are selected passages from an essay on the “Sociology of Imperialism” written by Schumpeter in 1919.
The analysis of that phenomenon by Schumpeter is in total antithesis with that of Lenin. Imperialism is not seen as the most advanced stage of capitalism but as the clear sign that pre-capitalistic (i.e. feudal) aspects survive in capitalism. This results from the subservience of the capitalists to state rulers from whom they ask for “protection against external and even domestic enemies. The bourgeoisie seeks to win over the state for itself, and in return serves the state and state interests that are different from its own.” Another consequence of this subservience is that “nationalism and militarism, while not creatures of capitalism, become ‘capitalized’ and in the end draw their best energies from capitalism.” In the end, it is this imperialistic, nationalistic, militaristic capitalism that would dominate large part of the XX century and, for clarity sake, it should be better to drop the term capitalism and define that period of history with the more appropriate name of statism.
Free Trade in the interest of the citizens
It may be stated as being beyond controversy that where free trade prevails no class has an interest in the forcible expansion as such. For in such a case the citizens and goods of every nation can move in foreign countries as freely as though those countries were politically their own – free trade implying far more than mere freedom from tariffs. In a genuine state of free trade, foreign raw materials and foodstuffs are as accessible to each nation as though they were within its own territory. Where the cultural backwardness of a region makes normal economic intercourse dependent on colonization, it does not matter, assuming free trade, which of the ‘civilized’ nations undertakes the task of colonization. Dominion of the seas, in such a case, means little more than a maritime traffic police. Similarly, it is a matter of indifference to a nation whether a railway concession in a foreign country is acquired by one of its own citizens or not – just so long as the railway is built and put into efficient operation. For citizens of any country may use the railway, just like the fellow countrymen of its builder – while in the event of war it will serve whoever controls it in the military sense, regardless of who built it. It is true, of course, that profits and wages flowing from its construction and operation will accrue, for the greater part, to the nation that built it. But capital and labour that go into the railway have to be taken from somewhere, and normally the other nations fill the gap. It is a fact that in a regime of free trade the essential advantages of international intercourse are clearly evident. The gain lies in the enlargement of the commodity supply by means of the division of labour among nations, rather than in the profits and wages of the export industry and the carrying trade. For these profits and wages would be reaped even if there were no export, in which case import, the necessary complement, would also vanish. Not even monopoly interests – if they existed – would be disposed toward imperialism in such a case. For under free trade only international cartels would be possible. Under a system of free trade there would be conflicts in economic interest neither among different nations nor among the corresponding classes of different nations. And since protectionism is not an essential characteristic of the capitalist economy – otherwise the English national economy would scarcely be capitalist – it is apparent that any economic interest in forcible expansion on the part of a people or a class is not necessarily a product of capitalism.
Protectionism as a weapon of the states
Protective tariffs alone Рand harassment of the alien and of foreign commodities Рdo not basically change this situation as it affects interests. True, such barriers move the nations economically farther apart, making it easier for imperialist tendencies to win the upper hand; they line up the entrepreneurs of the different countries in battle formation against one another, impeding the rise of peaceful interests; they also hinder the flow of raw materials and foodstuffs and thus the export of manufactures, or conversely, the import of manufactures and the export of raw materials and foodstuffs, possibly creating an interest in Рsometimes forcible Рexpansion of the customs area; they place entrepreneurs in a position of dependence on regulations of governments that may be serving imperialist interests, giving these governments occasion to pervert economic relations for purposes of sharpening economic conflicts, for adulterating the competitive struggle with diplomatic methods outside the field of economics, and, finally, for imposing on people the heavy sacrifices exacted by a policy of autarchy, thus accustoming them to the thought of war by constant preparation for war. Nevertheless, in this case the basic alignment of interests remains essentially what it was under free trade. We might reiterate our example of railway construction, though in the case of mining concessions, for example, the situation is somewhat different. Colonial possessions acquire more meaning in this case, but the exclusion from the colonies of aliens and foreign capital is not altogether good business since it slows down the development of the colonies. The same is true of the struggle for third markets. When, for example, France obtains more favourable tariff treatment from the Chinese government than England enjoys, this will avail only those French exporters who are in a position to export the same goods as their English confr̬res; the others are only harmed. It is true, of course, that protectionism adds another form of international capital movement to the kind that prevails under free trade Рor rather, a modification of it Рnamely, the movement of capital for the founding of enterprises inside the tariff wall, in order to save customs duties. But this capital movement too has no aggressive element; on the contrary, it tends toward the creation of peaceful interests. Thus an aggressive economic policy on the part of a country with a unified tariff Рwith preparedness for war always in the background Рserves the economy only seemingly rather than really. Actually, one might assert that the economy becomes a weapon in the political struggle, a means for unifying the nation, for severing it from the fabric of international interests, for placing it at the disposal of state power.
The alliance state rulers-national capitalists in favour of protectionism
This becomes especially clear when we consider which strata of the capitalist world are actually economically benefited by protective tariffs. They do harm to both workers and capitalists – in contrast to entrepreneurs – not only in their role as consumers, but also as producers. The damage to consumers is universal, that to producers almost so. As for entrepreneurs, they are benefited only by the tariff that happens to be levied on their own product. But this advantage is substantially reduced by the countermeasures adopted by other countries – universally except in the case of England – and by the effect of the tariff on the prices of other articles, especially those which they require for their own productive process. Why, then, are entrepreneurs so strongly in favour of protective tariffs? The answer is simple. Each industry hopes to score special gains in the struggle of political intrigue, thus enabling it to realize a net gain. Moreover, every decline in freight rates, every advance in production abroad, is likely to affect the economic balance, making it necessary for domestic enterprises to adapt themselves, indeed often to turn to other lines of endeavour. This is a difficult task to which not everyone is equal. Within the industrial organism of every nation there survive antiquated methods of doing business that would cause enterprises to succumb to foreign competition – because of poor management rather than lack of capital, for before 1914 the banks were almost forcing capital on the entrepreneurs. If, still, in most countries virtually all entrepreneurs are protectionists, this is owing to a reason which we shall presently discuss. Without that reason, their attitude would be different. The fact that all industries today demand tariff protection must not blind us to the fact that even the entrepreneur interest is not unequivocally protectionist. For this demand is only the consequence of a protectionism already in existence, of a protectionist spirit springing from the economic interests of relatively small entrepreneur groups and from non-capitalist elements – a spirit that ultimately carried along all groups, occasionally even the representatives of working-class interests. Today the protective tariff confers its full and immediate benefits – or come close to conferring them – only on the large landowners.
A protectionist policy, however, does facilitate the formation of cartels and trusts. And it is true that this circumstance thoroughly alters the alignment of interests.
The economic cartels and the fight amongst national capitalists
Union in a cartel or trust confers various benefits on the entrepreneur – a saving in costs, a stronger position as against the workers – but none of these compares with this one advantage: a monopolistic price policy, possible to any considerable degree only behind an adequate protective tariff.
Now the price that brings the maximum monopoly profit is generally far above the price that would be fixed by fluctuating competitive costs, and the volume that can be marketed at that maximum price is generally far below the output that would be technically and economically feasible. Under free competition that output would be produced and offered, but a trust cannot offer it, for it could be sold only at a competitive price. Yet the trust must produce it – or approximately as much – otherwise the advantages of large-scale enterprise remain unexploited and unit costs are likely to be uneconomically high. The trust thus faces a dilemma. Either it renounces the monopolistic policies that motivated its founding; or it fails to exploit and expand its plant, with resultant high costs. It extricates itself from this dilemma by producing the full output that is economically feasible, thus securing low costs, and offering in the protected domestic market only the quantity corresponding to the monopoly price – insofar as the tariff permits: while the rest is sold, or ‘dumped’ abroad at a lower price, sometimes (but not necessarily) below cost.
What happens when the entrepreneurs successfully pursue such a policy is something that did not occur in the cases discussed so far – a conflict of interests between nations that becomes so sharp that it cannot be overcome by the existing basic community of interests. Each of the two groups of entrepreneurs and each of the two states seeks to do something that is rendered illusory by a similar policy on the part of the other. In the case of protective tariffs without monopoly formation, an understanding is sometimes possible, for only a few would be destroyed, while many would stand to gain; but when monopoly rules it is very difficult to reach an agreement for it would require self-negation on the part of the new rulers. All that is left to do is to pursue the course once taken, to beat down the foreign industry wherever possible, forcing it to conclude a favourable ‘peace.’ This requires sacrifices. The excess product is dumped on the world market at steadily lower prices. Counterattacks that grow more and more desperate must be repulsed on the domestic scene. The atmosphere grows more and more heated. Workers and consumers grow more and more troublesome.
Monopoly capitalism out of the alliance of big banks with big business
Although the relation between capitalists and entrepreneurs is one of the typical and fundamental conflicts of the capitalist economy, monopoly capitalism has virtually fused the big banks and cartels into one. Leading bankers are often leaders of the national economy. Here capitalism has found a central organ that supplants its automatism by conscious decisions. In the second place, the interests of the big banks coincide with those of their depositors even less than do the interests of cartel leaders with those of the firms belonging to the cartel. The policies of high finance are based on control of a large proportion of the national capital, but they are in the actual interest of only a small proportion and, indeed, with respect to the alliance with big business, sometimes not even in the interest of capital as such at all. The ordinary ‘small’ capitalist foots the bill for a policy of forced exports, rather than enjoying its profits. He is a tool; his interests do not really matter. This possibility of laying all the sacrifices connected with a monopoly policy on one part of capital, while removing them from another, makes capital exports far more lucrative for the favoured part than they would otherwise be. Even capital that is independent of the banks is thus often forced abroad – forced into the role of a shock troop for the real leaders, because cartels successfully impede the founding of new enterprises. Thus the customs area of a trustified country generally pours a huge wave of capital into new countries. There it meets other, similar waves of capital, and a bitter, costly struggle begins but never ends.
In such a struggle among “dumped” products and capitals, it is no longer a matter of indifference who builds a given railroad, who owns a mine or a colony. Now that the law of costs is no longer operative, it becomes necessary to fight over such properties with desperate effort and with every available means, including those that are not economic in character, such as diplomacy. The concrete objects in question often become entirely subsidiary considerations; the anticipated profit may be trifling, because of the competitive struggle – a struggle that has very little to do with normal competition. What matters is to gain a foothold of some kind and then to exploit this foothold as a base for the conquest of new markets. This costs all the participants dear – often more than can be reasonably recovered, immediately or in the future. Fury lays hold of everyone concerned – and everyone sees to it that his fellow countrymen share his wrath. Each is constrained to resort to methods that he would regard as evidence of unprecedented moral depravity in the other.
Capitalism, concentration and protectionism
The character of capitalism leads to large-scale production, but with few exceptions large-scale production does not lead to the kind of unlimited concentration that would leave but one or only a few firms in each industry. On the contrary, any plant runs up against limits to its growth in a given location; and the growth of combinations, which would make sense under a system of free trade, encounters limits of organizational efficiency. Beyond these limits there is no tendency toward combination inherent in the competitive system. In particular, the rise of trusts and cartels – a phenomenon quite different from the trend to large-scale production with which it is often confused – can never be explained by the automatism of the competitive system. This follows from the very fact that trusts and cartels can attain their primary purpose – to pursue a monopoly policy – only behind protective tariffs, without which they would lose their essential significance. But protective tariffs do not automatically grow from the competitive system. They are the fruit of political action – a type of action that by no means reflects the objective interests of all those concerned but that, on the contrary, becomes impossible as soon as the majority of those whose consent is necessary realize their true interests. To some extent it is obvious, and for the rest it will be presently shown, that the interests of the minority, quite appropriately expressed in support of a protective tariff, do not stem from capitalism as such. It follows that it is a basic fallacy to describe imperialism as a necessary phase of capitalism, or even to speak of the development of capitalism into imperialism. We have seen before that the mode of life of the capitalist world does not favour imperialist attitudes. We now see that the alignment of interests in a capitalist economy – even the interests of its upper strata -by no means points unequivocally in the direction of imperialism. We now come to the final step in our line of reasoning.
Since we cannot derive even export monopolism from any tendencies of the competitive system toward big enterprise, we must find some other explanation. A glance at the original purpose of tariffs provides what we need. Tariff sprang from the financial interests of the monarchy. They were a method of exploiting the trader which differed from the method of the robber baron in the same way that the royal chase differed from the method of the poacher. They were in line with the royal prerogatives of safe conduct, of protection for the Jews, of the granting of market rights, and so forth. From the thirteen century onward this method was progressively refined in the autocratic state, less and less emphasis being placed on the direct monetary yield of customs revenues, and more and more on their indirect effect in creating productive taxable objects. In other words, while the protective value of a tariff counted, it counted only from the viewpoint of the ultimate monetary advantage of the sovereign. It does not matter, for our purposes, that occasionally this policy, under the influence of lay notions of economics, blundered badly in the choice of its methods. (From the viewpoint of autocratic interest, incidentally, such measures were not nearly so self-defeating as they were from the viewpoint of the national economy). Every custom house, every privilege conferring the right to produce, market, or store, thus created a new economic situation which deflected trade and industry into ‘unnatural’ channels. All tariffs, rights, and the like became the seed bed for economic growth that could have neither sprung up nor maintained itself without them. Further, all such economic institutions dictated by autocratic interest were surrounded by manifold interests of people who were dependent on them and now began to demand their continuance – a wholly paradoxical though at the same time quite understandable situation.
Capitalist Pyramid critiquing capitalism in a 1911 publication advocating industrial unionism [Image: Wikimedia Commons]The bourgeoisie and its feudal traits: territorialism and nationalismThe trading and manufacturing bourgeoisie was all the more aware of its dependence on the sovereign, since it needed his protection against the remaining feudal powers; and the uncertainties of the times, together with the lack of great consuming centres, impeded the rise of free economic competition. Insofar as commerce and manufacturing came into being at all, therefore, they arose under the sign of monopolistic interest. Thus the bourgeoisie willingly allowed itself to be moulded into one of the power instruments of the monarchy, both in a territorial and in a national sense. It is even true that the bourgeoisie, because of the character of its interests and the kind of economic outlook that corresponded to those interests, made an essential contribution to the emergence of modern nationalism. Another factor that worked in the same direction was the financial relation between the great merchant houses and the sovereign. This theory of the nature of the relationship between the autocratic state and the bourgeoisie is not refuted by pointing out that it was precisely the mercantile republics of the Middle Ages and the early modern period that initially pursued a policy of mercantilism. They were no more than enclaves in a world pervaded by the struggle among feudal powers. The Hanseatic League and Venice, for example, could maintain themselves only as military powers, could pursue their business only by means of fortified bases, warehousing privileges, protective treaties. This forced the people to stand shoulder to shoulder, made the exploitation of political gains with a corporate and monopolistic spirit. Wherever autocratic power vanished at an early date – as in the Netherlands and later in England – and the protective interest receded into the background, they swiftly discovered that trade must be free – “free to the nethermost recesses of hell.”
Trade and industry of the early capitalist period thus remained strongly pervaded with pre-capitalist methods, bore the stamp of autocracy, and served its interests, either willingly or by force. With its traditional habits of feeling, thinking, and acting moulded along such lines, the bourgeoisie entered the Industrial Revolution. It was shaped, in other words, by the needs and interests of an environment that was essentially non-capitalist, or at least pre-capitalist – needs stemming not from the nature of the capitalist economy as such but from the fact of the coexistence of early capitalism with another and at first overwhelmingly powerful mode of life and business. Established habits of thought and action tend to persist, and hence the spirit of guild and monopoly at first maintained itself, and was only slowly undermined, even where capitalism was in sole possession of the field. Actually capitalism did not fully prevail anywhere on the Continent. Existing economic interests, ‘artificially’ shaped by the autocratic state, remained dependent on the ‘protection’ of the state. The industrial organism, such as it was, would not have been able to withstand free competition. Even where the old barriers crumbled in the autocratic state, the people did not all at once flock to the clear track. They were creatures of mercantilism and even earlier periods, and many of them huddled together and protested against the affront of being forced to depend on their own ability. They cried for paternalism, for protection, for forcible restraint of strangers, and above all for tariffs. They met, with partial success, particularly because capitalism failed to take radical action in the agrarian field. Capitalism did bring about many changes on the land, springing in part from its automatic mechanisms, in part from the political trends it engendered – abolition of serfdom, freeing the soil from feudal entanglements, and so on -but initially it did not alter the basic outlines of the social structure of the countryside. Even less did it affect the spirit of the people, and least of all their political goals. This explains why the features and trends of autocracy – including imperialism – proved so resistant, why they exerted such a powerful influence on capitalist development, why the old export monopolism could live on and merge into the new.
The feudal substance of Europe
These are facts of fundamental significance to an understanding of the soul of modern Europe. Had the ruling class of the Middle Ages – the war-oriented nobility – changed its profession and function and become the ruling class of the capitalist world; or had developing capitalism swept it away, put it out of business, instead of merely clashing head-on with it in the agrarian sphere – then much would have been different in the life of modern peoples. But as things actually were, neither eventuality occurred; or, more correctly, both are taking place, only at a very slow pace. The two groups of landowners remain social classes clearly distinguishable from the groupings of the capitalist world. The social pyramid of the present age has been formed, not by the substance and laws of capitalism alone, but by two different social substances, and by the laws of two different epochs. Whoever seeks to understand Europe must not forget this and concentrate all attention on the indubitably basic truth that one of these substances tends to be absorbed by the other and thus the sharpest of all class conflicts tends to be eliminated. Whoever seeks to understand Europe must not overlook that even today its life, its ideology, its politics are greatly under the influence of the feudal ‘substance,’ that while the bourgeoisie can asserts its interests everywhere, it ‘rules’ only in exceptional circumstances, and then only briefly. The bourgeois outside his office and the professional man of capitalism outside his profession cut a very sorry figure. Their spiritual leader is the rootless ‘intellectual,’ a slender reed open to every impulse and a prey to unrestrained emotionalism. The ‘feudal’ elements, on the other hand, have both feet on the ground, even psychologically speaking. Their ideology is as stable as their mode of life. They believe certain things to be really true, others to be really false. This quality of possessing a definite character and cast of mind as a class, this simplicity and solidity of social and spiritual position extends their power far beyond their actual bases, gives them the ability to assimilate new elements, to make others serve their purposes – in a word, gives them prestige, something to which the bourgeois, as is well known, always looks up, something with which he tends to ally himself, despite all actual conflicts.
The nobility entered the modern world in the form into which it had been shaped by the autocratic state – the same state that had also moulded the bourgeoisie. It was the sovereign who disciplined the nobility, instilled loyalty into it, ‘statized’ it, and, as we have shown, imperialized it. He turned its nationalist sentiments – as in the case of the bourgeoisie – into an aggressive nationalism, and then made it a pillar of his organization, particularly his war machine. It had not been that in the immediately preceding period. Rising absolutism had at first availed itself of much more dependent organs. For that very reason, in his position as leader of the feudal powers and as warlord, the sovereign survived the onset of the Industrial Revolution, and as a rule – except in France – won victory over political revolution.
The bourgeoisie servant of the state
The bourgeoisie did not simply supplant the sovereign, nor did it make him its leader, as did the nobility. It merely wrested a portion of its power from him and for the rest submitted to him. It did not take over from the sovereign the state as an abstract form of organization. The state remained a special social power, confronting the bourgeoisie. In some countries it has continued to play that role to the present day. It is in the state that the bourgeoisie with its interests seeks refuge, protection against external and even domestic enemies. The bourgeoisie seeks to win over the state for itself, and in return serves the state and state interests that are different from its own. Imbued with the spirit of the old autocracy, trained by it, the bourgeoisie often takes over its ideology, even where, as in France, the sovereign is eliminated and the official power of the nobility has been broken. Because the sovereign needed soldiers, the modern bourgeois – at least in his slogans – is an even more vehement advocate of an increasing population. Because the sovereign was in a position to exploit conquests, needed them to be a victorious warlord, the bourgeoisie thirsts for national glory – even in France, worshiping a headless body, as it were. Because the sovereign found a large gold hoard useful, the bourgeoisie even today cannot be swerved from its bullionist prejudices. Because the autocratic state paid attention to the trader and manufacturer chiefly as the most important sources of taxes and credits, today even the intellectual who has not a shred of property looks on international commerce, not from the viewpoint of the consumer, but from that of the trader and exporter. Because pugnacious sovereigns stood in constant fear of attack by their equally pugnacious neighbours, the modern bourgeois attributes aggressive designs to neighbouring peoples. All such modes of thought are essentially non-capitalist. Indeed, they vanish most quickly wherever capitalism fully prevails. They are survivals of the autocratic alignment of interests, and they endure wherever the autocratic state endures on the old basis and with the old orientation, even though more and more democratized and otherwise transformed. They bear witness to the extent to which essentially imperialist absolutism has patterned not only the economy of the bourgeoisie but also its mind – in the interests of autocracy and against those of the bourgeoisie itself. This significant dichotomy in the bourgeois mind – which in part explains its wretched weakness in politics, culture, and life generally; earns it the understandable contempt of the Left and the Right; and proves the accuracy of our diagnosis – is best exemplified by two phenomena that are very close to our subject: present-day nationalism and militarism.
Nationalism and militarism supported by capitalism
Nationalism is affirmative awareness of national character, together with an aggressive sense of superiority. It arose from the autocratic state. In conservatives, nationalism in general is understandable as an inherited orientation, as a mutation of the battle instincts of the medieval knights, and finally as a political stalking horse on the domestic scene; and conservatives are fond of reproaching the bourgeois with a lack of nationalism, which from their point of view, is evaluated in a positive sense. Socialists, on the other hand, equally understandably exclude nationalism from their general ideology, because of the essential interests of the proletariat, and by virtue of their domestic opposition to the conservative stalking horse; they, in turn, not only reproach the bourgeoisie with an excess of nationalism (which they, of course, evaluate in a negative sense) but actually identify nationalism and even the very idea of the nation with bourgeois ideology. The curious thing is that both of these groups are right in their criticism of the bourgeoisie. For, as we have seen, the mode of life that flows logically from the nature of capitalism necessarily implies an anti-nationalist orientation in politics and culture. This orientation actually prevails. We find a great many anti-nationalist members of the middle class, and even more who merely parrot the catchwords of nationalism. In the capitalist world it is actually not big business and industry at all that are the carriers of nationalist trends, but the intellectual, and the content of his ideology is explained not so much from definite class interests as from chance emotion and individual interest. But the submission of the bourgeoisie to the powers of autocracy, its alliance with them, its economic and psychological patterning by them – all these tend to push the bourgeois in a nationalist direction; and this too we find prevalent, especially among the chief exponents of export monopolism. The relationship between the bourgeoisie and militarism is quite similar. Militarism is not necessarily a foregone conclusion when a nation maintains a large army, but only when high military circles become a political power. The criterion is whether leading generals as such wield political influence and whether the responsible statesmen can act only with their consent. That is possible only when the officer corps is linked to a definite social class, as in Japan, and can assimilate to its position individuals who do not belong to it by birth. Militarism too is rooted in the autocratic state. And again the same reproaches are made against the bourgeois from both sides – quite properly too. According to the “pure” capitalist mode of life, the bourgeois is unwarlike. The alignment of capitalist interests should make him utterly reject military methods, put him in opposition to the professional soldier. Significantly, we see this in the example of England where, first, the struggle against a standing army generally and, next, opposition to its elaboration, furnished bourgeois politicians with their most popular slogan: “retrenchment.” Even naval appropriations have encountered resistance. We find similar trends in other countries, though they are less strongly developed. The continental bourgeois, however, was used to the sight of troops. He regarded an army almost as a necessary component of the social order, ever since it had been his terrible taskmaster in the Thirty Years’ War. He had no power at all to abolish the army. He might have done so if he had had the power; but not having it, he considered the fact that the army might be useful to him. In his “artificial” economic situation and because of his submission to the sovereign, he thus grew disposed toward militarism, especially where export monopolism flourished. The intellectuals, many of whom still maintained special relationships with feudal elements, were so disposed to an even greater degree.
Just as we once found a dichotomy in the social pyramid, so now we find everywhere, in every aspect of the bourgeois portion of the modern world, a dichotomy of attitudes and interests. Our examples also show in what way the two components work together. Nationalism and militarism, while not creatures of capitalism, become ‘capitalized’ and in the end draw their best energies from capitalism. Capitalism involves them in its working and thereby keeps them alive, politically as well as economically. And they, in turn, affect capitalism, cause it to deviate from the course it might have followed alone, support many of its interests.
Imperialism as expression of the autocratic state in alliance with capitalism
Here we find that we have penetrated to the historical as well as the sociological sources of modern imperialism. It does not coincide with nationalism and militarism, though it fuses with them by supporting them as it is supported by them. It too is – not only historically, but also sociologically – a heritage of the autocratic state, of its structural elements, organizational forms, interest alignments, and human attitudes, the outcome of pre-capitalist forces which the autocratic state has reorganized, in part by the methods of early capitalism. It would never have been evolved by the ‘inner logic’ of capitalism itself. This is true even of mere export monopolism. It too has its sources in absolutist policy and the action habits of an essentially pre-capitalist environment. That it was able to develop to its present dimensions is owing to the momentum of a situation once created, which continued to engender ever new ‘artificial’ economic structures, that is, those which maintain themselves by political power alone. In most of the countries addicted to export monopolism it is also owing to the fact that the old autocratic state and the old attitude of the bourgeoisie toward it were so vigorously maintained. But export monopolism, to go a step further, is not yet imperialism. And even if it had been able to arise without protective tariffs, it would never have developed into imperialism in the hands of an unwarlike bourgeoisie. If this did happen, it was only because the heritage included the war machine, together with its socio-psychological aura and aggressive bent, and because a class oriented toward war maintained itself in a ruling position. This class clung to its domestic interest in war, and the pro-military interests among the bourgeoisie were able to ally themselves with it. This alliance kept alive war instincts and ideas of overlordship, male supremacy, and triumphant glory – ideas that would have otherwise long since died. It led to social conditions that, while they ultimately stem from the conditions of production, cannot be explained from capitalist production methods alone. And it often impresses its mark on present-day politics, threatening Europe with the constant danger of war.
This diagnosis also bears the prognosis of imperialism.
The pre-capitalist elements in our social life may still have great vitality; special circumstances in national life may revive them from time to time; but in the end the climate of the modern world must destroy them. This is all the more certain since their props in the modern capitalist world are not of the most durable material. Whatever opinion is held concerning the vitality of capitalism itself, whatever the life span predicted for it, it is bound to withstand the onslaughts of its enemies and its own irrationality much longer than essentially untenable export monopolism – untenable even from the capitalist point of view. Export monopolism may perish in revolution, or it may be peacefully relinquished; this may happen soon, or it may take some time and require desperate struggle; but one thing is certain – it will happen. This will immediately dispose of neither warlike instincts nor structural elements and organizational forms oriented toward war – and it is to their dispositions and domestic interests that, in my opinion, much more weight must be given in every concrete case of imperialism than to export monopolist interests, which furnish the financial ‘outpost skirmishes’ – a most appropriate term – in many wars. But such factors will be politically overcome in time, no matter what they do to maintain among the people a sense of constant danger of war, with the war machine forever primed for action. And with them, imperialisms will wither and die.
It is not within the scope of this study to offer an ethical, aesthetic, cultural, or political evaluation of this process. Whether it heals sores or extinguishes suns is a matter of utter indifference from the viewpoint of this study. It is not the concern of science to judge that. The only point at issue here was to demonstrate, by means of an important example, the ancient truth that the dead always rule the living.
